Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 300,000 shares of stock outstanding. Under Plan II, there would be 210,000 shares of stock outstanding and $2,367,000 in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.
A. If EBIT is $600,000 Which Plan will result in the higher EPS?
B. If EBIT is $900,000 Which Plan will result in the higher EPS?